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Develop Vendor Partners

Feb 1, 2007

While an entrepreneur's own energy and resourcefulness are critical to the success of retail kiosk and cart programs, vendor support is also crucial. In assessing programs, most experts advise retailers to look for vendors that not only offer a selection of appealing products, but also partner with the kiosk operators to provide additional expertise.

That expertise should begin with help in determining where to locate. Some vendors have existing agreements with mall and shopping center owners and managers that will ensure a good position in the center, obtain advantageous rental rates, and also ensure that the retail kiosk or cart and its products bring something unique to the location and are not near vendors of related or competing products.

A good vendor partner will also provide schematics of displays, signage, and advice on price points, promotions and even training on how to talk with prospective customers. While franchisers tend to dictate to kiosk operators, vendors that license are often seen as more liberal, allowing the operators to blend their own ideas and tactics with the vendors' proven experiences.

Some malls and shopping centers provide the kiosks, which are then tailored to a vendor's product lines. Others allow operators to literally drive in with their own kiosks, although they often have specific criteria regarding the unit's size and style.

"All are titled VW vehicles," says Capesby Jones, Peace Frogs' president. "We take out the engine, and have developed a wide range of product variations as content." The vans and cars are so eye catching, Jones says, that many consumers ask if they are for sale. They are not.

Peace Frogs supplies the vehicle for free to a licensee that orders $15,000 wholesale of the company's merchandise, and it pays shipping. Licensees are not permitted to sell anything but Peace Frogs merchandise from the vans or beetles.

The only difference between a van and a beetle is the size, Jones says. "Typically, each can be configured with quantities of between 150 and 200 different Peace Frogs products. There are more than 4,000 different Peace Frogs products. The primary group is apparel, but it also includes stickers, jewelry, plush animals and accessories. All are manufactured by and exclusive to Peace Frogs, and contain its distinctive logo.

"We work with each retailer to configure a mix of products that meet the needs of customers in each location," Jones says. There are 25 Peace Frogs units in operation now at malls, shopping centers, theme parks and stores, according to Jones. The company does help licensees contact and negotiate with mall owners and managers of other potential locations.

Jones says he doesn't recommend that licensees advertise, "Because the mall owners do, and the licensees benefit from the traffic the mall generates." While Jones declines to predict a unit's profit potential, since it varies by time of year and location, he says, "we've had units net $100,000 over the holidays."

"We give as much advice as our licensees let us give them," he adds. "We don't dictate, but we are always available to help improve sales."

Perfect Petzzz, a division of CD3 Inc. in Austin, TX, holds the patent and trademark on a family of realistic plush dogs and cats that breath with the help of two, D alkaline batteries. It operates a licensed cart program patterned after an adoption center concept, and refers to, "adoption versus selling," says Paula Holt, specialty retail manager.

The cart program has been in operation for about two years and there are now about 100 locations. Its comprehensive cart program is a turnkey operation that includes a professionally designed display, the Perfect Petzzz visual merchandising kit, product, and training in customer service and sales. It also helps with money saving tips and buying trends.

The company also has relationships with mall owners, and will help a licensee find a location. "We ensure that there is only one Perfect Petzzz cart in a mall," says Dawn Wellington, marketing manager. "We have found that malls that are tourist destinations are the most productive." The company has data, resources and software that contain details on different malls' demographics and traffic patterns.

Typically, the mall provides the cart. In obtaining a license, a retailer pays $3,500, which includes $350 for the merchandising kit, a one time $150 deposit, which is refundable at the end of the contract, and $3,000 worth of Perfect Petzzz merchandise. Contracts run from the day a retailer signs on until they expire on January 31, which takes retailers through the important holiday season. They can, and often do, re-up.

The kit includes signage, cages that make it resemble a pet adoption center, and a range of merchandising aids. "We're happy to discuss proven sales practices," Holt says, "and we have a list of expressions to use in conversation with prospects and customers."

The initial $3,000 in inventory, she says, "Generally includes about 260 pets, some accessories and one case each of brushes and hats, which help add to tickets."

The approximately two dozen pet breeds, include all the most popular ones and come in what the company calls, "bundles." A bundle, such as the Lassie, Dalmatian and Orange Tabby, includes a bed, collar, carrying case and adoption paper, in addition to the plush pet. Each bundle wholesales for $10.79 a unit, and the suggested retail price is $39.95 a unit.

"Retailers that place orders online receive a five percent discount," Holt says, "which reduces the wholesale cost to $10.25 a unit." A brush wholesales for 40 cents and has a suggested retail of $4.99 a unit, while other accessories range from $2.50 to $5 a unit, and the corresponding suggested retail prices are $7.99 and $19.95 a unit.

Cart operators can discount and set their own pricing, however, "We suggest that it's best to start with the suggested retail price," Holt says. Some operators offer promotions, such as buy two and get a free tote, or other variations on the theme.

Wellington and Holt say profitability varies, because the rent rates vary significantly, and labor costs can, too, for operators who hire sales staff. "The average rent rate for November-December can range from $6,000 to $25,000," Holt says, depending on the mall. Some individual retailers have licensed as many as 10 Perfect Petzzz carts and rely primarily on paid staff, while others operate a cart themselves.

While those factors make it difficult to provide profit statistics, she says carts average $75,000 in gross sales for the two month holiday period. Dogs are the better sellers, she adds. And customers range from kids to grandparents, including customers who buy Perfect Petzzz for nursing homes and office colleagues.

Perfect Petzzz parent company, CD3 Inc., is also developing Discgear, a second kiosk program focused on media storage products. It is also being developed into a comprehensive program, infused with many components to help retailers succeed.

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